What does Digital mean to you?

What does Digital mean to you?
Celent held a client roundtable on the subject of “Digital.” We had a sneaking suspicion that there wasn’t a lot of consensus on what that word actually means, so just prior to the event we asked participants “to list three words or initiatives that you associate with digital in your organization.” Here’s what we found: of 30 responses from 10 people, only two terms were mentioned twice: “mobile” and “customer experience” (which isn’t quite a single word). Every other word was unique. Digital WordCloud I find this fascinating: there’s no agreement on what digital means, and yet it’s one of the hottest topics in financial technology today. How are we going to deal with this issue when we can’t even agree on what it is? We’d suggest that defining what digital means in your organization is a vital first step to refining your digital strategy. My colleague Will Trout has also blogged on what we found during our roundtable.  You can find his thoughts here: http://wealthandcapitalmarketsblog.celent.com/2014/04/12/celent-roundtable-exploring-digital-in-financial-services/  

NCR & Digital Insight – Trouble in Paradise?

NCR & Digital Insight – Trouble in Paradise?

Late last year, NCR announced the acquisition of Digital Insight (DI). It’s been quite the ride for DI as they are on their third owner in a very short period of time. Apparently the ride hasn’t been very smooth for DI bank customers – we have heard from a number of them regarding digital banking outages. The press has gotten wind of this as well – Fairwinds Credit Union customers cope with online-banking outages.  

Take a peek at the list of disruptions notices posted on the Fairwinds CU Facebook page.

Kudos to the CU and its President for being transparent and communicating with their customers.

Re-imagining Banking

Re-imagining Banking
On June 30th, Peter Sands, Group CEO of Standard Chartered, published an article in Financial Times called Banking is heading towards its Spotify moment. The article seems to have resonated incredibly well with the banking community: at a conference this week, two senior banking executives from different parts of the world referred to the article, while we have been discussing it with our clients. The article argues that “banking is very digitasable, but we have not yet seen the fundamental transformation of business models that have taken place in other sectors, such as music […] Margins will fall unless banks reinvent what they offer and how they work.” At Celent we agree wholeheartedly – the move towards “all things digital” is both a serious threat and an incredible opportunity in banking. The regulators and their “zero tolerance” attitude is one of the many barriers making it difficult for banks to be truly innovative. But many recognize the need for change and are investing accordingly. We are committed to helping our clients along their journey through our research, insights, and networking events. Dan in his recent blog post summarized our NYC event on Omni-Channel Delivery. We will also be hosting a banking roundtable in London on Oct 17th, “Evolve or Die: The Future of the Bank Account.” Again, it will be a bank-only forum with an emphasis on idea exchange, and if you are interested in attending, please contact Chris Williams at cwilliams@celent.com or +44 20 8870 7875.

Fintech Startups – Coopetition or Competition? Business Models Are Shifting.

Fintech Startups – Coopetition or Competition? Business Models Are Shifting.
I spend a fair bit of time analyzing and following the fintech startup scene. I’ve met and interacted with numerous startups over the years, as well as through industry events like  Finovate and Innotribe. I frequently get very excited by their potential, and what they can bring to the industry. I admire the founders of these firms as they attempt to make their mark in an age old, highly regulated industry, that is slowly but surely adapting to the popularity of digital channels. Is there a killer fintech startup business model? Here are a handful of models out there that I invite you to weigh in on:
  1. Should startups go after consumers/businesses directly? This is the most popular model, with most firms taking this type of approach. Examples include Square, Simple, PayPal, etc. It’s also one of the hardest models as it’s quite difficult for a newly minted organization to establish a brand and build critical mass on its own.
  2. Can startups be successful at enabling others in addition to going after their core market? This is becoming an increasingly popular model as startups seek out new streams of revenue. It’s particularly popular in the payment space as it allows for a potentially increasing stream of transactional revenue. This is done by offering something like an SDK that others can build on. Examples include card.io, Stripe, etc.
  3. Is the name of the game to simply use financial institutions as a distribution channel?  Some startups take this route right out of the gate (e.g. MineralTree, Cardlytics, etc.), while others pivot to this model (e.g. Social Money, Bill.com, etc.). Finally there are startups that simply fall back on this model once they realize that they have been unsuccessful in models 1 or 2. While it sounds great to use a bank as a distribution channel, it can be a frustrating experience given the very long sales cycles typically encountered with financial institutions. Burning cash while attempting to close a deal with a bank can be a tough pill to swallow.
  4. Can a startup have it all by tackling all three of of the models ? It’s possible but it can also spread a business, particularly a newer one, dangerously thin
Finally, what does all of this mean for financial institutions? How do they get involved in industry disruption? Celent firmly believes that banks should dedicate efforts towards not only innovation, but disruption. It’s a necessary part of competing, and has to be led and sponsored by senior management. Most banks need at least a handful of projects that  are disruptive – that’s no easy task since managing technology and culture change is never a quick fix. What do you think? How should startups approach the market? How can banks play a meaningful role in the digital world?